There's a great demand for technical talent in today's market, which makes finding a better job extremely easy. Also, when a developer/designer gets tired of working for someone else, being paid peanuts, and dealing with bad management - they start an agency of their own; and the cycle repeats.
Agencies lose money on projects because they work more than they charge due to bad organization, last minute changes, scope creep, subpar processes, etc. A badly run agency can last for a surprisingly long time before it dissolves (or gets acquired by a bigger agency) and founders start another company (hoping they’ll get it right this time).
Technology is constantly changing and agencies who are initially agile don't say that way for long. They don't innovate and get better. As a result, they get complacent, happy to churn out the same work again and again until someone younger overthrows them. They slowly lose clients as they stop doing the things that got them hired - great ideas and execution.
A typical agency doesn't have time to think and develop a long-term strategy because it’s consumed by everyday activities. They are constantly in crunch, catching up with deadlines and work. And the work is always given priority because taking time to reflect isn't billable. So they keep taking new projects instead of taking a time-out, catching their breath, and checking if they're not heading over a cliff.
Too Many Layers
The more an agency grows, the more managers it hires. As a result, processes get sluggish and costs increase; suddenly, there are several communication layers between clients and teams, meetings and interruptions abound, and nothing gets done. An agency that initially had 1 manager for 12 workers, ends up with 100 people - and 1 manager for every 3 workers.
The Three Elements of Strong Businesses
Starting a business is easy because you have the enthusiasm, good ideas, and flexibility. There's no management, hiding who makes how much money, coordination, or rules. It's just a few people, trying to make it on their own, pouring their heart and soul into the work.
But growth means hiring more people and taking on more serious projects, where the chance of tripping up rises exponentially. A CEO doesn't have time to manage and bond with new people like they used to because it’s not scalable , so they delegate it to a manager. But they don't share the same values and can't pass on the spirit of the organization that well.
As a result, people treat the agency like just another job, a way to pay their bills. They plan to move on in a few months so there's no reason to care about improving the organization. On the other hand, the management doesn't care about long-term impact because they're pressed by deadlines and budgets.
So somewhere in the process, the agency begins to rot. They hire a consultant and implement agile or lean or some other trademark framework, hoping it'll solve everything. The initial enthusiasm gives everyone a short productivity boost, but that efficiency is soon lost as they go back to their old decadent ways.
The whole problem with introducing agile processes and techniques is that they don't address the root cause - the underlying philosophy and the people. It takes more to be great than using Kanban board, limiting work in progress, writing a vision statement, or hiring the best talent.
To have a strong and healthy business, you need 3Ps:
At the base of the pyramid is the philosophy that inspires everything you do. It's the foundation on which you base how you work and think. People and processes are built on top of the philosophy and they are its visible manifestation.
Truly great companies are constantly trying to improve in all things, no matter how small they seem. When you reward someone because of a tiny improvement, you send a clear message that no improvement is too small, which acts as a gateway to way bigger ones; plus, they add up.
For example, after a project ends, take the time to reflect on what happened and what can be better. Each project should make you better, smarter, faster, and more efficient. As you gain more experience and excellence, adjust your hourly rates. After all, you should charge more if you can deliver work of higher quality and faster than when you first started. If you don't change the pricing every few projects, you're not growing.
Having a philosophy of continual improvement doesn't mean implementing Scrum, rapid prototyping, or some other buzz word. Every innovation is doomed if your people are discouraged to think and act independently, trained only to do their job, and not make waves.
Most agencies for example can't pull of rapid prototyping because their culture isn’t built that way, both structurally and emotionally. They can't put out a prototype and tell their clients "We know it's not perfect but tell us what doesn't work and we'll fix it". No client will do that, and more importantly, employees are too scared to risk losing their job. The culture simply isn't there to support the process, no matter how good it may seem on paper. Rapid prototyping works in software startups, but not in agencies because of the fundamental philosophy mismatch.
Innovation takes time and nurturing, something that's foreign to project-focused agencies. You need to think about the long-term plan, even if it means sacrificing short term goals.
You need to think about your strategic market position and why someone would hire you. But building a brand takes more than that - you need long-term thinking to get away from the clutter.
Long-term planning is so neglected that most organizations hope project managers can fill in as a strategist. This is a serious mistake. A project manager only cares about projects - what happens to the rest of the universe doesn't matter as long as projects come on time and budget. They simply don't have the time or the energy to think about a bigger picture. When it hits the agency that they need change, hiring a strategist at that stage will be too late: it’ll be like calling in the fire-prevention officer when the building is already ash and smoke.
Agencies start out with a lot of expertise, but they slowly lose that expertise because they don't keep up with the speed of change and new technology. They're too busy monetizing their existing knowledge and so they don't grow - a typical example of short-term thinking.
You need to base your management decisions on a lasting philosophy, even at the expense of short-term financial gains. If you want to be in business 10 years from now, you need to embrace change: your goals, market position, capabilities, even specialization - they will all change.
The most dangerous time for any organization is not when it starts falling apart but when it gets successful.
When business is booming, companies become complacent and the team doesn't feel the urgency to become better or push themselves harder. They go on autopilot and stop growing. As a result, the quality erodes.
But if you take every opportunity to stir the pot, question your success, and remind yourself you’re mortal, to keep the company awake and ready to change. Never tell things are going well; always keep working and innovating like there are millions of others who have 24 hours each day to take everything away from you - because there are.
A philosophy can't be created in a month, or even several years; there's no rule or a memo that can make your employees instantly loyal, hard-working, and innovative. Instead, think of it like a seed you plant while you're young so that, given enough care and time, it grows into a mighty tree that'll bear fruits for many generations.
You build a philosophy every day with everything you do. The more authority you have in an organization, the more you can influence its culture. Every time you say "thanks", "good job", or "it needs to be better", you're building a culture and steering the company in a certain direction.
To expect excellence, you need to be excelent yourself, walk the walk, and empower people to do the same.
For example, if you're pressed by a deadline and cut some corners, your team will notice and think it's ok; it's a slippery slope and every action counts. If, on the other hand, you notice a defect, anticipate the client's complaint, and hold the shipment to fix it because you know it's not right to disappoint the client - you show others how important customer satisfaction really is.
Amazon is famous for their cheapness, but they have a good story behind it. An Amazon office needed a table, but instead of buying a new one, they improvised by taking a door and laying it down so it serves as the table. Instead of spending money on a trivial thing like a table, they used is a symbol of their culture.
Each new employee is shown the table to illustrate the importance of every penny because each penny saved can be passed on to the customer. Everything workers do at Amazon, they do it so they can offer the best price, even if it means dining on improvised tables.
The philosophy is the underlying foundation of your company but the people are its physical manifestation. They are more important than your processes because they make and improve processes.
People are your most precious resource because they're the most flexible as they can learn and grow beyond what they're doing right now.
Digital agencies are not like classic businesses where the talent is concentrated at the top; in agencies, the talent is concentrated at the middle to lower parts of the organization, as those people actually deliver the work.
An organization is nothing without its people as they bring the system and values to life by working, communicating, resolving issues, and growing together. They should be the main engine behind improvements as they're the ones in the trenches every day and know the process better than the management.
Project managers and other executive coordinators aren't there only to guide the company’s development but the development of the people and allowing them to do business the way they knew should be done. They should encourage, support, and demand employee involvement.
Most companies make the mistake of treating workers like cogs that can be easily replaced and focusing on the processes. But you should depend more on people, not less. They're the ones who design new things, come up with ideas, identify hidden workflow problems, and fix them. If people rely on a supreme wisdom of the all-powerful process and are met with resistance when they suggest improvements, don’t later wonder why you’re not agile or why you get less and less business.
Before you can build supreme digital solutions, you need to build people.
Everyone should know how to work effectively in small groups, solve problems, improve processes, collect and analyze data, and self-manage. Both decision and proposal making should be offloaded to workers so it's their job to discuss suggestions and arrive at a consensus before implementing any decision.
A culture that promotes improvements should also promote admitting a mistake and making amends. If people are conditioned to take criticism as a sign of weakness, they'll avoid speaking up in order to avoid blame or sounding stupid. In fact, the number one reason that makes a team successful is a chance to be vulnerable in front of others without a fear of repercussions.
You should praise people who openly address things that went wrong, take responsibility, and devise a plan to prevent these things from happening again. Instead of breeding a culture of passing the buck, you should encourage and reward people who try to improve the organization.
Project managers believe that the people have to be fully utilized and no person should ever run out of work. This may satisfy a typical 20th-century management accounting practice and look efficient, but it impedes the development of an improving culture.
If people are working all the time, they don't have the time or the energy to think about improving the processes - all they want is to finish their tasks on time, and go home. They know that if they make a suggestion, they get stuck with meetings, bureaucracy, and fighting with authority to make the idea work. Why would they do that when they can do what they're told, collect the paycheck, and move on to the next job when they find a better offer?
Don't be afraid of downtime as people can use that time to learn new things and improve the organization in the long run. Google has a rule that makes it ok for people to spend 20% of their time on other activities. Most people don't use it, but it's the idea that's important. A 100%, even 60% productivity is a myth so don't base management decisions around total productivity or they'll backfire and hurt you without you noticing it.
In order to really increase productivity, focus on:
- Making the environment free of noise and distractions,
- Limiting the size and frequency of meetings,
- Keeping the nexus of activity online so all the information are readily available and there are no interruptions,
- Letting people work alone or on a flexible schedule when they need,
- Empower people to make decisions, have autonomy over their work, and constantly learn new things.
This focus on people doesn't mean only your team, but your clients as well. You need to involve them on projects and work together. They should be your biggest collaborator. You need to update them on progress so you can solve problems together on time.
While working with you, clients should also pick up your philosophy of continual improvement. They should feel free to suggest how you can become better and vice versa. Use every chance to teach the client something new. They don't know about your field of work as much as you do - instead of viewing it as a hindrance, view it as a chance to make them a bit smarter than they were before they hired you.
For example, a client may complain that the website isn't pretty enough. Instead of making it prettier, explain that conversion is much more important than the visual look, which often only makes a site more difficult to use. It's best if you can teach them subtly throughout the project and guide their feedback so they end up feeling like they came up with the solution.
At the top of the pyramid are standardized processes you use. They are designed to help your people be more productive and get things done, while leaving room for continuous improvement.
A good agency has a number of processes that are liable to improvement:
- Screen potential clients, making sure you match their needs.
- Give a rough proposal before arranging a meeting.
- Have a kickoff meeting to precisely define the project scope and payment schedule.
- Sign a contract and a statement of work before you start working.
- Plan the project by breaking down work into tasks, with deadlines and assignees.
- Use a Kanban board or some other visual management tool to track progress.
- Watch for bottlenecks and limit work-in-progress.
- Automate reports so people don't waste time creating them.
- Estimate and track time you spend on tasks.
- Invoice often and quickly.
- Involve client and update them regularly.
- Build consensus with stakeholders.
When looking to implement a new processes, you may come across a system like Kanban that may seem inappropriate for your small team because it's too elaborate. But you have to consider the hidden perks that go beyond the traditional cost-benefit analysis. Take into account how the process will shape the people's minds. The new system may intrigue your team, get them interested in improving client collaboration, and ultimately find new, better ways to collaborate. This is why the underlying philosophy is so important to processes - in unleashes people's creativity and propensity to innovate .
When you make an improvement, learn by standardizing best practices and making them an officially part of your processes. For example, a designer may come up with a good workflow for getting feedback; instead of passing the know how ad hoc, standardize the process so others can use and build upon it. Don't reinvent the wheel with each new project but take something that works and build on it. If you don't standardize, the knowledge will fall into a black hole.
Processes should aim to reduce waste, which can be any activity that doesn't provide value or contribute to the client's satisfaction. So how to distinguish the value-added work from waste? Consider a developer who's busy coding, reading the specifications, and having meetings with the product owner; are they doing value-added work? You can't know by simply looking at what he does.
You have to follow the progress of the actual software they make. When you start analyzing each step of the process, you'll learn that they make a huge amount of information, some of which doesn't impact the final product at all (eg. progress reports or arbitrary documentation). This type of waste is a prime candidate for removal.
Time-consuming emails, lengthy reports filled with technical descriptions, and information overload - they‘re all waste; same goes for meetings which last too long (especially if they’re about sharing information everyone knows and there's no conclusion).
Identify activities that add value and get rid of everything else. If the customer isn't willing to pay for the work, drop it. Don't create assets or illustrations that don't end up in production, unless they're used as a step needed to achieve the final product.
Don't have rigid processes that minimize the impact of potential problems. You want the problems to surface quickly so people have to deal with them immediately or they’ll sink. This way, everyone is motivated to fix the problems and inefficiencies or they can't work. The best time to make an improvement is immediately.
When you put fixing an important but not urgent problem in your to-do list, you'll never get around addressing it and the technical/organizational debt will pile up. More importantly, by hiding vast inefficiencies, people will just assume a process typically takes days or weeks to complete and that it's normal. It’s not. They don’t realize that with a good process the same thing can be accomplished in a matter of hours. So don’t bullet-proof yourself against problems because problems that burn you are resolved quicker than the ones under your rug.
You need to think where you want to be, beyond your current projects, and then build a philosophy that supports that vision. Once you have the philosophy, invest in people and let them improve the processes so you get to where you want to be. The best time to get started is now.